1. - The Hannah Hasson Conversation

What has made the Starbucks brand
successful?
What challenges did/does this brand
face?
How will it survive as a brand in the
future?
The
Beginnings.
The Heritage Behind the Brand
• 1971, Single Store in Pikes
Place Market
– Howard Shultz steps into store for
the first time in 1981. Joins a year
later.
The name, inspired by Moby
Dick, evoked the romance of the
high seas and the seafaring
tradition of early coffee traders.
Original Inspiration
European
Coffee
House
Culture
“coffee as
art”
Café Florian in Venice, Italy
Fact Sheet.
Facts
Type
Public
Industry
Restaurants (Genre- Coffeehouse)
Founded
Pike Place Market in Seattle, Washington (March 30, 1971)
Founder(s)
Jerry Baldwin, Gordon Bowker, Zev Siegl
Headquarters Seattle, Washington, U.S.
Area served
Worldwide
Key people
Howard Schultz (Chairperson, President and CEO)
Facts
Revenue
Increase $ 13.29 billion (2012)
Operating
Income
Increase $ 1.50 billion (2012)
Net income
Increase $ 1.38 billion (2012)
Total assets
Increase $ 8.21 billion (2012)
Total equity
Increase $ 5.10 billion (2012)
Employees
149,000 (2011)
Brands:
Starbucks Coffee Company, Ethos water, Evolution Fresh, Hear Music,
La Boulange Bakery, Seattle's Best Coffee, Tazo , Teavana, Torrefazione
Italia
Starbucks Corporation 2011 Annual Report, Form 10-K, Filing Date Nov 18, 2011". secdatabase.com.
Locations
Number of locations
20,891 in 62 countries (March 22, 2013)
Newest Location:
Store set to open in Bogota, Columbia in 2014
"Loxcel Starbucks Map". Starbucks. March 22, 2013.
Partnerships
Apple in 2006
Apple adds Starbucks
Entertainment to iTunes Store
MSNBC in June 2009
Morning Joe program
“brewed by Starbucks”
Kraft Foods in 1998
Starbucks products to be sold in Mondelez Grocery Stores
Breaking!! November 2013: Starbucks to pay $2.8 billion fine to Kraft
spin-off Mondelez International for its premature unilateral
termination of the agreement.
Starbucks claimed that Kraft did not sufficiently promote its products and
offered Kraft $750 million to terminate the agreement. Kraft declined, but
Starbucks
anyway.
(13 November 2013). "Starbucks
Fined $2.8B inproceeded
Grocery Dispute, and
More" (Video upload). The Wall Street Journal. Retrieved 16 November 2013.
Tamara Rutter (15 November 2013). "2 Reasons Mondelez Doesn't Need Starbucks". Daily Finance. AOL Inc. Retrieved 16 November 2013.
Jargon, Julie (November 13, 2013). "Starbucks Defeated, Fined $2.8 Billion". The Wall Street Journal. pp. B1–B2.
The Starbucks
Story Year by
Year.
1970’s-1980’s
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•
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•
•
•
•
•
•
•
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1971-1976 Only sold roasted whole bean coffee
Green coffee beans during this time were purchased from Peet’s
1982 Schultz, joins Starbucks in marketing & operations
1983 Schultz travels to Italy- coffeehouse culture
1984 Convinces Starbucks to test coffeehouse concept
1984 Original owners became partners at Peet’s because of the increase
consumption of specialty coffee
1985 Founds Il Giornale offering coffee and espresso beverages
1986 Six stores in Seattle
1987 Il Giornale acquires Starbucks. Schultz assumes command over
Starbucks brand.
– Begins connecting to their customers
– Enter into a 5 year non compete agreement with Peet’s
Wow!!
1988 Astounding $10 million dollars in
revenue, or 45% increase.
1989 Starbucks was roasting over 2 million
pounds in coffee
1990’s
• 1991 First privately held company to offer a stock option program
– Opens first airport store at Seattle International Airport
• 1992 Starbucks goes public being traded on NASDAQ as SBUX
– Over 140 store fronts in the US
• 1994 Starbucks starts selling CDs in store
• 1995 Introduces Frappuccino®
• 1996 established first store out of North America in Tokyo, Japan &
partnership with Pepsi
• 1997 1,142 Store locations
• 1998 $1.3 billion in revenue 1999 1200 stores and purchase of “Hear
Music” and Tazo Tea
2000-2007
• 2000 Schultz steps down from CEO to chairman and Orin Smith
steps in as CEO
• 2001 Introduction of Starbucks Card
– 4,709 Stores
• 2003 Acquires Seattle Coffee Company
– Per store annual sales was an average of $900,000 and new offerings
of food, books, movies and music
• 2004 Light or “skinny” versions became available
– 8,569 Store!
– Opened alliances within airports and other facilities such as Target
• 2005 Jim Donald CEO
– Acquires Ethos Water
• 2006 Opened stores in Brazil and Egypt
– Started selling their line of licensed products in grocery stores
– 12,440
• 2007 $9.4 billion in worldwide revenue
2008
• Starbucks now viewed as a “stuff-seller”
• First reported decline in same store sales
• 2008 Closed 100 of least profitable stores to reestablish their mission
• Schultz re-emerges as CEO, to help revitalize “the
watering down of the Starbucks experience and
the commoditization of the Starbucks brand”
(memo from Howard Shultz to senior
Management, February 14, 2007)
http://globalassets.starbucks.com/assets/e56b2a6b08244aaab0632dc6ac25ad0d.pdf
2009-Present
• 2009 Starbucks focuses efforts in the community and
starts gaining a “conscience” among humanitarian and
conservationist efforts
• 2012 Expansions. New plan to open over 1,000 new
locations and largest Starbucks opens on University of
Alabama campus
• 2013 Starbucks opens first location in Colombia &
announces many more Colombian locations to arise
• Today more than 20,000 locations worldwide in 62
countries
http://www.starbucks.com/about-us/our-heritage
Schultz, Howard. "How Starbucks Got Its Mojo Back." Newsweek157.12 (2011): 50-55. Academic Search Elite. Web. 2 Nov. 2013
SWOT Analysis.
Strengths
• Brand equity ( we even
calculate our seasons by
Starbucks!)
• Strong customer connect
• Expanding operating margin
• Focus on employee
relationships
• Company with a conscience
Corporate Conscience
• C.A.F.E. (Coffee and Farmer Equity)
– Promote high quality and socially responsible
collective coffee
http://globalassets.starbucks.com/
Weaknesses
•
•
•
•
Overdependence on the U.S. market
Aggressive expansion
Pressure from Wall Street
Brand viewed as pretentious
Opportunities
• Entry into health and food markets
• Growing international presence
– India, Asia and other growing markets
Threats
•
•
•
•
•
Growing competition
Rising commodity costs
Sustaining growth
Fading impact of word-of-mouth advertising
Legal proceedings
1. MarketLine Revenue Analysis
2. GlobalData Financial and Strategic Analysis Review
3. "Starbucks Coffee Company in the 21st Century" case study by Nancy F. Koehn, Marya
Besharov and Katherine Miller
The Coffee
Wars.
Coffee Wars
• Starbucks declines in the 2000s, leading
heavier competition with Dunkin' Donuts
(DD) and McDonald's (McD) despite Schultz's
"pain" in his company being compared with
fast-food restaurants.
• Economic recession + rising prices for food
commodities (which were at an all-time high
in 2008) caused Starbucks to increase their
prices, which pushed consumers to DD or
McD.
Coffee Wars
March 2007 Consumer Reports ranked
Starbucks behind McDonald's Premium Roast.
The magazine called Starbucks coffee "strong,
but burnt and bitter enough to make your eyes
water instead of open"
• Starbucks tests drive-through windows and
introduces breakfast sandwiches to their
menu.
• McD added espresso and flavored coffee to
its menu, which it marketed as "specialty
coffee," and sold for 60 cents cheaper than
Starbucks.
• Starbucks began using television
commercials in November of 2007.
Coffee Wars
• McD created "UnsnobbyCoffee.com" and
billboard advertisements in Seattle that said
"Four bucks [for espresso] is dumb.”
• Schultz was reinstated as CEO of Starbucks,
and re-focuses on educational and artful
coffee experience and customer service
http://www.youtube.com/watch?v=r2y_GwKzxck
(PS. Here’s how the size chart works)
Demi
3 US fl oz (89 ml)
Smallest size. Espresso shots.
Short
8 US fl oz (240 ml)
Smaller of the two original sizes
Tall
12 US fl oz (350 ml)
Larger of the two original sizes
Grande16 US fl oz (470 ml)
Italian for "large"
Venti
20 US fl oz (590 ml),
Italian for "twenty”
26 US fl oz (770 mL)
Trenta
30 US fl oz (890 ml)
Italian for "thirty"
Marketing Controversy
Starbucks has been accused of:
1. Driving out small independent competitors
2. Intentionally operating at a loss
3. Saturating the market (clustering several
locations in small geographic area)
Klein, N. (2001). No Logo New York: Flamingo, pp. 135–140
"Store Wars: Cappuccino Kings". BBC News. June 9, 2004.
Wander, Jonathan (March 2010). "Ken Zeff". Pittsburgh Magazine.
January 2013
The Future of
the Starbucks
Brand.
2013 Coffee Consumer Trends Reports
June 20, 2013 HIGHLIGHTS
• 83% of Americans had one coffee/espresso drink in the past year (up
5%)
• 63% of American adults consume coffee daily (same as 2012)
• 75% of American adults consume coffee weekly (up slightly)
• 76% of Hispanic-Americans drink coffee daily (up 13%)
• 12% of American Adults own single-serving coffee (up significantly from
2012)
• 81% of American adults aware of single serving coffee (up significantly
from 2012)
• Consumer Ages:
• 18-24 at 41% (down 9%)
• 60+ at 76% (up 5%)
Marketing
Tactics.
Starbucks Evening
(As of January 2012)
• Customers want more options to
relax in store in the evening
• Selected locations only
• Special menu 4pm-close. Includes
beer, wine, appetizers
• “Less hurried atmosphere perfect
for winding down.”
• Modeled after European
coffeehouses that evolve with the
time of day
• Live music and poetry reading
Starbucks Drive Thru
(As of September 2013)
• US only
• Goal: 60% in 1,500 new
US locations
• Aimed at sustainability
• “Store in a Box”: modular
design
• Less than 1000 sq. feet
• Assembled off premises
and delivered.
This store designed to
look like “shipping
containers” from local
port
http://news.starbucks.com/news/innovative-new-drive-thrus
Starbucks Train Car
(As November 2013)
• Zurich, Switzerland
• Seats 50 People
• Specifically designed for
the locale
http://news.starbucks.com/news/
Starbucks opened first
store in Europe 11
years ago in
Switzerland
Single Servings
(As of February 2011)
• 2010, SB serves premium single
serves which accounted for 2/3rds of
growth coffee sales in US.
• Starbucks’ Via (instant coffee)
generated $180 million.
• SB VIA permeates the hospitality
industry
• 2012 SB introduces a line of single
serving coffee makers called
Starbucks Verismo with coffee pods
Tweet-A-Coffee
(As of October 2013)
• Tweet a Coffee
• Allows Starbucks to collect
User info
• Less Friction in Starbucks
Sales
http://www.washingtonpost.com/
My Starbucks Rewards
• 2009, loyalty card program
established
• 2013, opened to reward
Starbucks brand groceries
and Teavana purchases
Works in
Conjunction
with the App
that lets you
scan to pay and
win rewards
In July 2013,
10% of store
sales were
made using the
app.
"Mobile Payment At U.S. Starbucks Locations Crosses 10% As More Stores Get Wireless Charging"
Consistent Fortune Magazine Rankings
Reason Cited:
1. Employees of the company
were offered stock rewards
for working 20 hours/week
2. "There is potential for
anyone to move up the
ladder."
http://money.cnn.com/magazines/fortune/bestcompanies/2013/snapshots/94.html?iid=bc_lp_arrow1
“The way ‘we’ see it…”
Our group has come to the conclusion that the Starbucks
brand will thrive in future if:
1. Continued participation in the health and wellness
markets: transparency with ingredients and processes.
2. Strong presence in and advocate for humanitarian and
conservationist efforts. Make themselves a brand with a
conscience worth supporting.
3. Protecting the unique identity of each Starbucks store,
to avoid the “big chain” feel and to preserve the “artful
and educational coffee ambiance ” at home in each
locale.
4. Gain prestige via corporate culture rankings.
Original Inspiration
In this #1 New York Times bestseller, the CEO
of Starbucks recounts the story and
leadership
lessons behind the global coffee company’s
comeback
In 2008, Howard Schultz decided to return as
the CEO of Starbucks to help restore its
financial health and bring the company back
to its core values. In Onward, he shares this
remarkable story, revealing how, during one
of the most tumultuous economic periods in
American history, Starbucks again achieved
profitability and sustainability without
sacrificing humanity.
“The road is paved with so many companies that
have lost their way through thinking that they
can be all things to all people.
The strength of Starbucks brand and the success
of our company is linked to focus and discipline.
We’ll continue to be a coffee company.
That’s who we are.”
-Howard Shultz, CEO